Corporate fraud and misconduct : investigative and regulatory priorities

This article investigates the profile of the companies that have been investigated for corporate fraud and misconduct. Our definition of fraud includes financial statement fraud, market misconduct fraud such as insider trading or false disclosures, and managerial fraud. The particular evidence presented relates to those instances of corporate fraud and misconduct investigated by the Australian corporate regulatory, Australian Securities and Investments Commission (ASIC), and relates to sanctions for fraud, misconduct or compliance breaches. Using data compiled from the public announcements in the ASIC reports over the period 2004-2008, we categorise the type of fraud and misconduct breaches ASIC chooses to report and investigate.

Regulating financial institutional culture: reforming the regulatory toolkit

Unethical behaviour and misconduct in the financial services industry is asignificant problem. Laws aimed at misconduct or incentives to misbehave can be rendered ineffective by poor culture within financial institutions. Various regulatory and industry initiatives to tackle the problem have been proposed or put in place in Australia. This article provides an overview of these initiatives and argues that while such strategies may be worthwhile, they also have shortcomings. The article contends that ameliorating cultural problems within the financial industry requires a multi-disciplinary approach and Australia should therefore consider introducing a supervisory technique pioneered by the Netherlands Central Bank (DNB) that incorporates social andorganisational psychology. It further argues that this approach, when placed in the hands of a regulator, offers a radical regulatory tool that could provide the “missing link” in promoting a culture of integrity within financial institutions.The DNB approach is described and various legal, theoretical and policy issues raised by this approach are discussed.